SUBMISSION TO THE
Code Committee for Financial Advisers
Proposed minimum requirements of
continuing professional training for
authorised financial advisers
PREPARED BY
THE NEW ZEALAND INSTITUTE OF CHARTERED
ACCOUNTANTS
February 2010
1
Introduction
1.
The New Zealand Institute of Chartered Accountants (‘NZICA’) welcomes the
opportunity to comment on the proposed minimum requirements of continuing
professional training for authorised financial advisers. NZICA supports mandatory
professional development where that serves the public interest.
2.
On its own CPD does not provide assurance that all members will provide high quality
professional service all the time. Doing so involves more than maintaining
professional competence; it involves applying knowledge with professional judgement
and an objective attitude. Also, there cannot be assurance that every person who
participates in a CPD program will obtain the full benefits of that program. Despite the
inherent limitations of any CPD program, it is certain that professionals who are not upto-date on current technical and general knowledge pertinent to their work will not be
able to provide professional services competently.
3.
NZICA has a century long history in regulating its members in the public interest to
ensure the highest professional and ethical standards are met. The requirement for
members to maintain their skills and knowledge is embedded in ethical standards
documents, and NZICA has required mandatory CPD since 1995. Information on our
CPD requirements are provided at paragraphs 11 to 17.
4.
NZICA supports the objectives of the proposed CPT requirements. We have made
points on each consultation question. Our main points are that:
5.
•
where credible organisations have in place professional development/training
programmes that are tested, monitored and reasonably equivalent, the Code
Committee should recognise those programmes.
•
the minimum requirements may be too inflexible and complex to enable the
Code committee’s objectives to be met. The prescriptive nature of the
requirements may result in confusion, poor learning outcomes and non
compliance. It is NZICA’s experience that reducing complexity of CPD/CPT
requirements, and increasing flexibility in definitions and concessions is more
likely to lead to an achieveable regime for both the professional and for the
organisation monitoring compliance.
NZICA looks forward to having further discussions with the Code Committee on this
standard. If you would like to discuss any aspect of this submission with NZICA,
please contact, in the first instance, Julie Haggie – Senior Manager Specialisations
(phone: 917 4861, or e-mail: julie.haggie@nzica.com).
The New Zealand Institute of Chartered Accountants
6.
The New Zealand Institute of Chartered Accountants members make up the majority of
the accounting profession in New Zealand. NZICA has approximately 31,000 members
of whom close to 6000 work overseas. NZICA members operate throughout the
economy, participating in and advising all types of businesses, entities and individuals.
NZICA operates an active network of 18 branches, 15 in New Zealand and three
overseas.
7.
NZICA is an active member of the International Federation of Accountants (IFAC).
IFAC strives to serve the public interest through the development of standards in the
2
areas of auditing, education, ethics, and public sector financial reporting; by
advocating transparency and convergence in financial reporting; by providing best
practice guidance for professional accountants employed in business; and by
implementing a membership compliance program. 140 professional accountancy
organisations are members of IFAC.
8.
NZICA is also an active member of the Global Accounting Alliance (GAA). The Alliance
facilitates co-operation between nine of the worlds leading professional accounting
organisations, representing over 700,000 professional accountants. The Alliance
works with national regulators, governments and stakeholders to promote quality
accounting services, share information and collaborate on important international
issues, including influencing the global regulatory environment. Mutual recognition of
GAA members’ respective continuing professional development programmes has
steadily increased over the last ten years, as member bodies ensure that the quality of
their admissions and training programmes are consistent with the international
standard.
9.
NZICA prepares its submissions through a synthesis of member views, in house
regulatory experience, research and contracted specialist advice. Member views are
sought through a variety of means including an open invitation to the membership for
comment on issues of interest, standing committees of volunteers, ad hoc committees
and informal networks of members. NZICA’s submissions to government can be
viewed at www.nzica.com.
10.
As well as preparing submissions to government on issues of importance to its
members and the wider business community, NZICA:
• develops and promulgates ethical rules, professional standards and related
guidance;
• develops national financial reporting standards and contributes to the
development of international financial reporting standards;
• provides quality assurance services to members;
• promotes the ‘Chartered Accountant’, ‘Associate Chartered Accountant’ and
‘Accounting Technician’ brands;
• provides strong input to the international accounting community, through IFAC and
GAA;
• provides networking and career and practice development opportunities; and
• provides professional education and information services to members.
11.
NZICA is committed to promoting public policy that furthers the overall interests of New
Zealand. NZICA operates under a strong culture of putting public interest before
member interest.
NZICA’s requirements for Continuing Professional Development
12.
NZICA is committed to supporting members to maintain their competence and
knowledge. Continuing professional development (CPD) helps members keep up to
date, providing them with the valuable knowledge, skills and competitive advantage
that is essential to succeed in today's business environment.
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13.
NZICA has adopted the International Education Standard (IES7) of IFAC1. This sets
the benchmark for the implementation by professional accounting bodies of continuing
professional development programmes. It requires IFAC member bodies to
implement a mandatory CPD requirement as an integral part of their ongoing
membership requirements, and requires member bodies to facilitate access to CPD
opportunities and resources to assist professional accountants in meeting their
responsibility for lifelong learning.
14.
NZICA’s Code of Ethics2 includes a duty (Rule 8) for members to maintain
competence:
Rule 8: Duty to Maintain Competence
A member has a duty to observe and maintain a high standard of professional
Competence throughout the member’s professional career.
15.
Following a 2008-09 review (the consultation element of which attracted
unprecedented level of member response) NZICA continuing professional
development requirements will change from 1 July 2010. The current required level of
CPD will be retained, but in order to encourage members to take a longer term view of
their professional development a rolling three year period will be introduced. Members
will be required to undertake a minimum of four hours of ethics training every five
years, and will have to maintain detailed records of their CPD activities (and be able to
verify their participation if requested). Members are encouraged to evaluate upon and
plan their CPD activity.
16.
NZICA requires that members undertake a minimum annual level of CPD, comprising
both verifiable and non-verifiable activities. As of 1 July 2010:
• Chartered Accountants (CAs) will be required to complete 120 hours of relevant
CPD over each rolling three year period, of which 60 hours must be verifiable, and
must complete a minimum of 20 hours CPD in each year.
• Associate Chartered Accountants (ACAs) admitted to the Institute after June 2006,
will be required to complete 90 hours of relevant CPD over each rolling three year
period, of which 45 hours must be verifiable, and must complete a minimum of 15
hours CPD in each year.
• Accounting Technicians (ATs) will be required to complete 60 hours of relevant
CPD over each rolling three year period, of which 30 hours must be verifiable, and
must complete a minimum of 10 hours CPD in each year.
17. In terms of compliance:
• NZICA may require members to produce CPD logs at any time as an indicator that
they have satisfied their ongoing membership requirements.
• NZICA requires members to make an annual declaration of their CPD hours.
• NZICA conducts an annual audit of a percentage of members to check CPD
compliance.
• The Practice review process for members in public practice includes scrutiny of the
CPD logs of the member under review.
• The rules allow for discipline of a member for failure to meet their CPD
requirements.
18.
NZICA supports its members’ post-admission professional development through:
1
International Education Standard IES7, Continuing Professional Development: A program of lifelong
learning and continuing development of professional competence, IFAC, January 2006.
2
: the Code can be viewed at:
http://www.nzica.com/AM/Template.cfm?Section=Ethical_Professional_Standards
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• A National Professional Development business unit which provides face to face and
online learning and coordinates the provision of national, branch and Special
Interest Group conferences and seminars. Members may of course choose nonNZICA events to complete their structured/verifiable CPD.
• Special Interest Groups. Because the Institute’s members cover a diverse range of
disciplines and interests, many members form SIGs to provide social networking
and professional development opportunities with a specific focus. During the 2009
year SIGs held a total of 305 events and webcasts.
• Trained registry, branch and other staff who can assist members with enquiries
about CPD activities and compliance.
• An electronic online booking system which identifies competency areas and areas
of accounting practice and allows the recording of members’ attendance into NZICA
database and the CPD online log (offering a means of verifiability for monitoring
purposes).
• A CPD Online log (soon to be released) allows members the opportunity to record
their CPD activities and to reflect on the extent to which these activities have
influenced their professional competence. The log can be made available to NZICA
during compliance checking.
• MINT. This is an electronic tool provided to members. It assists members to
explore career paths open to them, compare their current competencies with those
required to reach the top of their career, and build a career path. It also helps
member keep track of the competencies and professional development resources
that they are interested in.
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NZICA response to the proposed minimum standards
19.
NZICA supports the Committee’s proposal for mandatory continuing professional
training for Authorised Financial Advisers. A mandatory system establishes the
benchmark for developing and maintaining the professional competence necessary to
protect the public interest.
Consultation Question 1 Do you think the key objectives of the proposed CPT
requirements are appropriate?
a.
NZICA suggests that the Code Committee consider including a statement in its
objectives that offers a vision of the developing professional.
20.
In general, NZICA supports the key objectives. They address the issues of quality
assurance and consumer confidence. They advocate a level of flexibility, they
recognise the considerable learning that many AFAs will have to go through to gain
authorisation. They recognise the role that professional and others organisations have
in providing training and continuing education. They encourage self-determination,
and appropriate record keeping.
21.
NZICA suggests that the Committee consider including a statement that offers a vision
of the developing professional. It is NZICA’s experience that reinforcing an
expectation of ‘lifelong learning’ assists in the fostering of the culture of the
‘professional’ within a professional group, and this is also part of NZICA’s commitment
to IES7. The Code Committee draft standard advocates self determination as an
objective, but the emphasis of its content appears to be largely on meeting the
requirements’.
Consultation Question 2: Do you think that the proposed minimum number of CPT
hours (20 per year) is appropriate, if not, what would be an appropriate number of
hours? How would you prefer this to be structured, for example 1 calendar year or
more?
22.
b.
NZICA’s recommendation in response to Consultation Question 6 is also
relevant to this question. (In that recommendation NZICA submits that as a
practical way of recognising that some AFAs may belong to more than one
relevant professional body, the Code Committee could manage a form of mutual
recognition (of CPD/CPT) process with particular professional bodies or industry
bodies.)
c.
NZICA recommends that the Code Committee ensures that it is able to provide
concessions where AFAs are unable to meet the CPT requirements.
d.
NZICA recommends that the Code Committee implements a 2 or 3 year rolling
period for CPT requirements.
e.
NZICA suggests that the Code Committee aims for a single (common)
registration/practising/ CPT period for AFAs, and ensures consistency with
references to ‘single calendar year’ and ’12 month period’.
The proposed number of CPT hours (20 per year) is consistent with that required by
comparable professional bodies. But when added to the quite specific requirements it
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will place an unreasonable burden on our members whose NZICA-eligible CPD may
not fit within the limited definitions of the Code’s requirements.
23.
This important issue for our members is addressed in more detail in response to
Consultation Question 6. The points made there are also relevant to this question.
24.
NZICA further suggests that flexibility be built into the standards document to allow for
situations where a professional faces circumstances such as a career break (e.g.
pregnancy) or having to work part-time. The Code Committee should have the ability
to reduce the requirements for compliance with CPT. In our experience the
advantages of offering ‘concessionary’ categories (low income, retired, and ‘career
break’) where fees and CPD requirements are adjusted are that they:
• recognise that professionals have to juggle career and life circumstances
• reinforce the concept of lifelong development
• encourage greater buy-in to CPD compliance.
25.
From 1 July 2010 NZICA will be operating a three year rolling period of CPD for its
members. This allows members the ability to spread their CPD across a longer period,
without reducing the requirement to maintain their competency. It is consistent with
international trends, and supports those members who are undertaking advanced
study over a period of time.
26.
The Code Committee proposes that (point 4, first para) “the first CPT year will be the
12 month period commencing from the date of an AFA’s initial authorisation by the
Securities Commission. Subsequent CPT years will be each 12 month period of
authorisation thereafter.”
27.
It appears from this that the Securities Commission will manage a variable registration
and authorisation process. The variable registration/authorisation period is not
common in professional regulation in New Zealand (most regulatory bodies maintain a
single practising year), particularly in smaller professions and brings with it challenges
of tracking individual members according to their registration/authorisation date. This
difficulty will flow on to the monitoring by the Code Committee of AFA compliance
against CPD requirements.
28.
NZICA and many other professional bodies manage variable initial entry dates by
expecting part-requirements for CPD in the first year, in order to facilitate easier
operational management of registration and compliance checking processes, by
aligning re-registration dates and deadlines for CPD compliance.
29.
As a minor comment NZICA notes that Consultation Question 2 mentions a ‘single
calendar year’: this would be inconsistent with the statement made in the first
paragraph under Point 4 of the consultation document, i.e. that CPT years will operate
on a 12 month period following authorisation and thereafter).
Consultation Question 3 Do you think the split of Unstructured and Structured
Learning is appropriate (12 of the 20 CPT hours per year are required to be met by
Structured Learning) and if not, what would be appropriate?
f.
NZICA recommends that the split of required unstructured/structured hours is
amended to 10/10 rather than 12/8
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30.
NZICA considers that a simpler split of 10/10 is reasonable and easier for
professionals to keep in mind.
Consultation Question 4 Are there any other Structured or Unstructured Learning
categories that you would like to see included in the list provided?
g.
The Code Committee should widen and make more flexible its definitions of both
structured and unstructured training
h.
The NZ Register of Quality Assured Qualifications should be referenced, to allow
non-NQF tertiary qualifications (e.g. degrees) to be included in structured
activities.
i.
The Code Committee could re-assess the relative values that it places on tertiary
and NQF qualifications. An hour for hour (with a possible upper limit) should be
used
j.
The Code Committee could clarify its definition of ‘professional designation’ (due
to considerable variability in design and/or maintain a ‘schedule of designations’
k.
The Code Committee could re-assess the relative values that it places on
workshops and courses, compared to tertiary papers. The demands of assessed
tertiary study should be recognised.
l.
Repetitive activity (teaching the same lesson more than once) should not be able
to be claimed.
m.
Preparation time for membership of technical and other relevant committees
should be allowed, to reflect the underpinning thinking that is a necessary aspect
of meeting preparation, and pre or post-meeting decision-making or activity.
NZICA suggests omitting “actual committee meeting time only,”
n.
The requirement for a limit of a maximum of five hours per year in each
unstructured activity area is unnecessarily complex, and could be deleted.
o.
Participation in non NQF registered in house or externally provided training
seminars, courses and workshops should be included in structured activity
p.
Writing articles, particularly if peer reviewed, should be included in the structured
activity.
q.
NZICA suggests two alternatives to specifying numbers of hours under
compulsory training categories:
- delete, or reduce the number of required activities (e.g. to ethics and
specialist knowledge); or
- require AFAs to provide evidence in their log book that they have addressed
all activity types, perhaps over a longer period of time (suggest 2 year time
period).
the Code Committee could provide guidance documents where it perceives there
may be a gap in knowledge.
r.
31.
Since the introduction of mandatory CPD, NZICA has found that a flexible (rather than
prescriptive) approach to the categorisation of activities is more likely to encourage a
higher level of acceptance and compliance by members, and manageable
administration of the advice and compliance process.
32.
NZICA suggests that the definitions of structured/unstructured training in the draft
standard and in the table do not reflect the many ways that people can receive
structured and unstructured training. Specific suggestions are made above, but the
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crux of them is that the Code Committee should widen and make more flexible its
definitions of both structured and unstructured training. Under the Committee’s
definition of structured training NZICA members will find that few of their NZICA
defined structured hours will be transferable to their requirements under AFA
authorisation. NZICA is concerned that the restriction to these types of training may
prove a barrier to AFAs seeking alternative training that is appropriate, relevant, of
good quality and, in particular, accessible.
33.
NZICA’s definition of structured activity is that in general, structured/verifiable CPD
events are courses, conferences and seminars organised and delivered by competent
individuals. The defining features of structured CPD activities are that they are most
likely to require interactive learning, they sometimes have an assessment component
and they involve some teaching element by competent specialists. Other activities that
may qualify as structured learning include service as a member on a technical
committee, writing technical articles, or presenting a structured course.
34.
NZICA’s structured/verifiable activities may consist of:
• NZICA national conferences and courses
• NZICA branch courses and seminars, NZICA Special Interest
• Group training events
• training from other providers or professional bodies
• in-house training and presentations
• assessed distance learning
• university courses
• conferences – local and international
• other structured courses
• serving on a technical committee
• publishing professional or academic papers, articles, research and other
publications that have relevance to one’s current or future work
• participating as a speaker in conferences, briefing sessions and discussion groups
• developing training sessions or courses
• facilitating and/or marking professional examinations.
35.
In terms of unstructured learning, there is a further disconnect between the definition of
the Code Committee and that of NZICA which is likely to prove problematic for NZICA
members seeking transferability of their CPD activities. NZICA guides members by
including the following in ‘unstructured/non-verifiable’ activities:
• reading professional / technical articles
• educational DVDs and webcasts
• specific reading material that relates to practical work
• undertaking distance learning that is not assessed
• collegial discussion, where learning is fostered
• discussions with, and informal training from, experts and
• mentoring others, where learning/development also occurs for the member.
36.
Compulsory Training Categories NZICA is not opposed to compulsory training
categorisation per se. The Institute is about introducing mandatory ethics training this
year. But the level of prescription in the proposed requirements is daunting. For
members in rural or isolated areas, meeting the demands of the requirements will add
another compliance hurdle. The risk in applying such a prescriptive requirement may
be that AFAs seek opportunities to ‘tick’ two hour pockets of learning, with service
providers tailoring multiple short courses on that basis. Two hour courses have a
limited benefit.
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37.
It is NZICA’s belief that the responsibility for maintaining competency should be placed
on the professional’s shoulders. It is for them to assess their competency needs and
gaps in particular areas and to address those in order to meet their requirements
under the Minimum Standards for Ethical Behaviour and Client Care.
38.
NZICA also queries the rationale behind the requirement to undertake two hours in
training on Financial adviser business practices, processes and governance, and
suggests that the Committee look at using other tools to address the perceived
problem (guidance documents, for example).
Consultation Question 5. Is the proposed professional development plan and self
managed recording system appropriate? If not, what would be a practical alternative?
s.
NZICA recommends that any requirement for a development plan should take
into account the action, evaluation and reflection elements of the learning cycle
(as well as planning).
t.
In the interests of promoting AFAs to be independent learners, and recognising
the realities of initial training requirements, of working as a professional and
having access to training activities, the ‘development plan’ should be promoted
as a guidance document rather than a regulated requirement.
u.
In relation to verification of structured activities, NZICA recommends that ‘could
include’ should be used instead of ‘must’ to allow for alternative means of
verification, and to facilitate compliance.
39.
The professional development plan and self managed recording system is laudable.
NZICA requires its own members to maintain a record of their CPD activities and to
maintain this for five years, and it strongly recommends a development plan and offers
tools to assist members with this. A CPD Online Log is shortly to be available to
members. This will allow members to enter their CPD activities, have automatic
recording of NZICA events and provide members the opportunity to reflect on the
value of the activity to their development.
40.
NZICA suggests that the Code Committee’s requirement for a plan could also
incorporate the concept of a continuous cycle of planning, action, evaluation and
reflection. A useful study on this is Approaches to CPD Measurement, a discussion
paper published by the International Accounting Education Standards Board (IAESB)
of IFAC. It illustrates a range of different approaches to CPD, as adopted by both
IFAC member bodies, and other professions in New Zealand and overseas.
41.
There is much emphasis placed on planning activities – details of courses etc. In
reality, an adviser’s practice may often be dictated by market trends, economic forces,
client needs. A financial adviser needs to show some responsiveness to the
developing context in which they work, and can only ‘plan’ to a point.
42.
A lot of what NZICA members do in relation to CPD is around availability of courses. It
is not always possible to source the appropriate training every year to meet one’s
training/PD needs.
43.
For the reasons above, NZICA would recommend that a practical alternative would be
to promote the development plan as a guidance document rather than a regulated
requirement.
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44.
The means of verification that are acceptable are too few, and do not allow for
alternatives NZICA suggests that this could place be a barrier to AFAs complying with
the CPT requirements. NZICA’s guidance is that “means by which CPD can be
verified include:
•
attendance records, registration forms or confirmation of registration in a learning
activity
•
independent assessment by a competent individual that a learning activity has
occurred
•
confirmation by an instructor, mentor or tutor of participation in a learning activity
•
confirmation by an employer of participation in an in-house programme, including
firms’ CPD logs
•
published research work
•
confirmation by other Committee or Board member/s of participation on a
Committee or Board.”
Consultation Question 6 On what basis do you think financial services industry
bodies and professional organisations should be recognised for the purpose of CPT
requirements?
v.
Because of the potential of any ‘recognition process’ to limit market access by
other training providers, for the purposes of structured learning, the Code
Committee should reconsider its proposal to ‘recognise’ training provided by
industry bodies and professional organisations.
w.
As a practical way of recognising that some AFAs may belong to more than one
professional body, the Code Committee could manage a form of recognition (of
CPD/CPT) process with particular professional bodies or industry bodies (either
mutual or independent).
45.
In reference to the recognition, under structured learning, of attendance at ‘recognised
professional organisations seminars/courses/workshops’, NZICA asks what problem
the Code Committee is attempting to address by limiting that sort of training to bodies
that are recognised? If implemented this would increase market share of training for
those organisations and reduce market opportunity for other training providers who
may be providing a very worthwhile product. Whilst NZICA could benefit from the
proposal, it questions the genuine benefit to AFAs and to consumers of effectively
placing a limit on the supply of training.
46.
NZICA has considered this issue in the past (recognising training providers), but has
not moved down this track because:
• the bureaucracy that is required to administer this process has not been
justifiable; and
• inconsistencies are created
47.
Rather, NZICA gives guidance to its members about what constitutes ‘structured’
activity and then expects its members to apply those guidelines in an appropriate
manner (i.e. choose appropriate training from appropriate providers).
48.
As noted in response to Question 2, whilst the proposed number of CPT hours (20 per
year) is consistent with that required by comparable professional bodies, that, added to
the particular nature of the requirements will place an unreasonable burden on our
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members’ whose NZICA eligible CPD may not fit within the limited definitions of the
Code’s requirements.
49.
Many NZICA members are not working full time in financial advice. Some will only be
working in specific areas. We note that ASIC has not prescribed a minimum number
of hours because “the time required would vary according to the adviser’s activities
and level of experience”. ASIC expects licensees to nominate an appropriate figure.3
50.
In its regulatory guide (Licensing: Training of financial product advisers), ASIC notes
that “some professional bodies have already set a minimum number of hours to be
satisfied by their members. We will monitor whether licensees nominate appropriate
minimum hours of continuing training. We will consider setting minimum hours if we
become aware that licensees are not nominating appropriate figures.”
51.
As noted earlier, NZICA has a long-standing CPD process in place. It already requires
through its Code of Ethics that members work only in their area of expertise. With
minor adjustment to its CPD policy, it could require that members with AFA status
have an additional requirement to undertake training in (the relevant areas of) financial
advice.
52.
As NZICA maintains a reporting and monitoring process for CPD, the Code Committee
can be confident that NZICA members who are AFAs would be compliant. NZICA
submits that it would be a reasonable and sensible approach for the Code Committee
to have some form of mutual recognition (or independent recognition) of the CPD
requirements of relevant professional and industry bodies.
53.
For your information NZICA holds mutual recognition agreements with eight
international accountancy bodies, and this recognition includes recognition of member
bodies’ respective CPD requirements.
-------------------------------------------------
54.
References:
a)
We have referred in our submission to NZICA standards documents for which
we can provide copies or more information should you wish. The standards
are available on NZICA’s website:
• Continuing Professional Development Guidelines
• Code of Ethics
b)
International documents mentioned in this submission are available as
follows:
• International Education Standard 7 (IES 7) - Continuing Professional
Development: A Program of Lifelong Learning and Continuing
Development of Professional Competence
http://www.ifac.org/Members/DownLoads/IES_7.pdf
• Approaches to CPD Measurement, published by the International
Accounting Education Standards Board (IAESB) of IFAC (copy available
from NZICA)
3
Australian Securities and Investment Commission Regulatory Guide 146 (RG 146): Licensing: Training of
financial product advisers
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